p. “(extlink)Fair Trade Coffee”:http://www.globalexchange.org/campaigns/fairtrade/coffee/ has become a buzzword recently, with the aim of providing a higher portion of proceeds back to coffee farmers, who have been hurt by low coffee prices, due to oversupply on the market. If we increase the price paid for generic coffee, however, won’t that simply encourage more farmers to grow coffee and make the supply glut worse?
p. “(extlink)The Daily Targum”:http://www.dailytargum.com ran an article discussing a NJPIRG event to educate students about Fair Trade Coffee. The claim has been made that layers of middlemen cut the profit margins of coffee farmers to an unsustainable level.
bq. The issue surrounding free trade stems from the unequal distribution of profit between small farmers who produce coffee bean crops and the long chain of intermediaries and corporations that reap the lucrative benefits, said Livingston College junior Marcus DeMott, chair of the NJPIRG student chapter.
p. The question that springs to my mind though, is how does this compare to the share received by growers in other categories, like tea, beer, and particularly wine? Wine in particular would seem to be a good model to look at, particularly with the increase in demand for premium blends of coffee recently. How much of a $12 bottle of wine’s fee goes back to the people who grow the grapes? Remembering the rate of alcohol taxation in the US, don’t forget that a large portion of that fee goes to no one but the government. Then take out the store’s cut, transportation costs, etc.
p. The Adam Smith Institute Weblog has an “(extlink)Article”:http://www.adamsmithblog.org/archives/000099.php where the claim is made that one of the prime reasons behind low coffee prices is agricultural subsidies in developed nations that prevent poor nation farmers from competing in potentially more lucrative types of food.
p. Given all these factors, the wine industry does seem to hold promise as a model for the coffee industry to follow. Instead of focusing on squeezing more money out of a commodity market for generic coffee beans, why not work to promote the subtle differences between different regions and preparation methods? Develop in effect a private label coffee that gets marketed on its unique taste and characteristics? People have clearly shown a willingness to pay for a product that better suits their taste. Also, then coffee farmers would not just be marketing a commodity product, but also their skill and experience at the whole process from growing to roasting.
I’m pretty sure that’s what Fair Trade coffee is trying to do … we pay a premium to enjoy coffee with the knowledge that the farmer got a decent cut of our $2.85. It’s a private subsidy, not a public one. Therefore as the market share of Fair Trade coffee (and ultimately other small producer copycats) will steal share from the Unfair Trade coffee. Market won’t necessarily grow because demand hasn’t grown. You’re not buying MORE coffee simply because Fair Trade coffee is available… you’re just buying more EXPENSIVE coffee.
I don’t drink coffee, I drink sugar cane tea. Nya nya.
I understand the idea of paying the coffee producer more, but my question was: if right now more people want to grow coffee than want to pay to drink it (which is the cause for the low prices) then if we raise the cost we pay for coffee, won’t that just cause more people to grow coffee instead of other crops? It seems what we need more is an end to agricultural subsidies to allow some of the excess coffee growers to work on wheat, rice, etc.
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